NTAP pullback offers buying opportunity

After BLASTING through trend line resistance in November, Netapp is finally experiencing a healthy pullback today after its earnings report. Earnings and guidance both exceeded analyst expectations, but the stock is pulling back anyway. This is consistent with the overall trend this earnings season. Lots of stocks have pulled back after earnings beats.

Netapp is one of my more favorite tech stocks due to its reasonable valuation and large dividend yield. I put its forward P/E at under 15 and its forward P/S at about 2.25. Forward dividend yield is possibly over 4%. I like how innovative it is for its size, with 10 patents per year per billion of market cap. (PEG ratio could be better, at about 9, but honestly that's a hard metric to use because growth rates change over time.) Netapp is trading about in-line with its median multiple over the last 4 years.

Sentiment-wise, Netapp looks quite positive. The average analyst rating is 8/10, and the put/call ratio is in bullish territory at 0.83. Technicals are bearish on the daily but bullish on the weekly scale. The average analyst price target is about 10% above the current price.

I increased my Netapp position by about 150% here and will add more if it pulls back to support at any of the weekly EMAs.


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